Hong Kong’s Stock Index Falls to Three-Month Low on China Rate

Dec. 28 (Bloomberg) -- Hong Kong stocks fell, dragging the
benchmark index to a three-month low as developers slid after
China raised interest rates for a second time since mid-October,
and the city’s home sales declined. The city’s market was closed
yesterday for a holiday.

China Overseas Land & Investment Ltd., controlled by the
nation’s construction ministry, slid 2.3 percent. Sino Land Co.,
the worst performer in the past month on the Hang Seng Property
Index, lost 3 percent. PetroChina Co., the nation’s largest oil
and gas producer, slipped 1.6 percent after agreeing to sell its
stake in a natural-gas pipeline operator to a Hong Kong-listed
subsidiary for 18.9 billion yuan ($2.9 billion).

China’s rate increase “is prompting people to say the
government is moving quickly because of the risk of inflation in
China and that there may be more rises ahead,” said Andrew
Sullivan, director of institutional sales at OSK Securities Hong
Kong Ltd. “The worry is moving from a housing bubble causing
inflation to wider inflation in the system. Much of that is
actually food and fuel over which China has little control.”

The Hang Seng Index has gained 3.4 percent this year, after
rallying 52 percent in 2009, on speculation growth in corporate
profits would counter China’s steps to curb property-price
inflation, Europe’s debt crisis, and concern about the pace of
the U.S. economic recovery.

China Resources Land

Shares in the gauge trade at an average 14.2 times
estimated earnings, compared with 17.2 times at the beginning of
this year.

China’s central bank said on Dec. 25 it would raise its
benchmark one-year lending rate by 25 basis points to 5.81
percent, and the one-year deposit rate the same amount to 2.75
percent. Economists surveyed by Bloomberg News earlier this
month forecast one percentage point of increases by the end of
2011.

The People’s Bank of China has ordered banks to set aside
more reserves six times this year, including three times since
November, after the nation reported inflation of 5.1 percent
last month, the highest in 28 months, with food costs climbing
11.7 percent.

Any additional measures by Hong Kong’s government to cool
house-price gains would run the risk of crimping demand among
“real buyers” as well as speculators, said Mark McCombe, chief
executive officer of HSBC Holdings Plc’s Hong Kong unit.

PetroChina slipped 1.6 percent to HK$9.77. Kunlun Energy Co.
is in the course to finalize an agreement to acquire a 60
percent stake in PetroChina Beijing Natural Gas Pipeline Co.,
according to a statement. Kunlun Energy dropped 3.4 percent to
HK$12. PetroChina owns 50.75 percent of the company, formerly
known as CNPC Hong Kong Ltd.

Macau Investment

Macau Investment Holdings Ltd., which offers property and
financial investment services, lost 5.4 percent to HK$2.80 after
saying East Asia Sentinel Ltd. has resigned as the company’s
auditor, effective Dec. 24, owing to a dispute over audit fees.

Zijin Mining Group Co., China’s biggest gold miner, slid
2.4 percent to HK$6.84. The Chinese province of Fujian fined
Zijin officials a combined 1.16 million yuan for waste spills in
July, according to a statement.

In a separate statement, Zijin said it agreed to sell the
assets and mining rights at its Yinyan tin mine in the southern
province of Guangdong to cover costs related to the deadly
collapse of a dam at the site in September.

Chu Kong Petroleum & Natural Gas Steel Pipe Holdings Ltd.,
which produces steel pipes for the oil and gas industry, plunged
9.1 percent to HK$3.21 after saying it may record a
“substantial” decrease in full-year profit.

China Construction Bank Corp. dropped 1.5 percent to
HK$6.68. The company tied up with Taiwan’s China Life Insurance
Co. to invest in Pacific Antai Life Insurance Co. China’s
second-largest bank said it bought 1 percent of Shanghai-based
Pacific Antai, boosting its stake to 51 percent.

All but four stocks fell among the 45 constituents of the
Hang Seng Index. Its futures slid 0.7 percent to 22,634.